Market Gamble - by Dan Liebman

Handicapping is an integral part of the Thoroughbred game, a cerebral exercise that involves time and patience, skill and luck, risk-taking and rewards. But the ultimate handicapping is not done by those who look at exactas and Pick Threes, but by the owners and breeders who realize how high the odds really are.

Commodity brokers know how hard it is to predict whether a market will be higher or lower in the future—from petroleum to pork bellies to corn or soybeans. But they have nothing on a Thoroughbred breeder or owner.

When a mating is planned, a breeder has no real idea if the sire he has chosen will be in or out of favor at the time he will sell the resultant foal as a yearling. This is one of the reasons more and more foals have been sold as weanlings in recent years, presenting an opportunity to take some cash off the table sooner rather than later.

In 2009, however, there figures to be both more weanlings and yearlings to be offered than ever, for several reasons. For one, the 2008 Keeneland November sale plummeted, causing many to scratch mares and foals. In numerous cases, as the sale dragged on, it seemed as though there were two types of consignors—those whose debts forced them to sell, and those who were not in such dire straits and withdrew their horses hoping things would be different next fall. Because of those decisions, many scratched weanlings will be offered as yearlings, and many in-foal mares will have their offspring consigned as weanlings.

The Thoroughbred auction market followed the general economy closely in 2008, dropping more as the year progressed. The amount spent in North America on juveniles in training was $182,671,515, down 5.4% from the 2007 total of $193,075,244. By the time summer and early fall arrived, global financial markets were sliding, and buyers spent $468,283,587 on yearlings, a decrease of 16.7% from $561,846,659 a year before. Then the bottom dropped out when the fall breeding stock sales were going on, with the amount spent on weanlings falling 34.2%, from $86,770,649 to $57,066,068 and the total paid for broodmares dropping 30.5%, from $370,099,831 to $257,153,903.

For all sales in North America in 2008, buyers spent $965,175,073, the first time in the past five years that number has not reached $1 billion. The dollars that flowed to owners and breeders at public auctions was $246,617,310 less than the $1,211,792,383 spent in 2007, a sharp decrease of 20.4%.

With nearly a quarter of a billion dollars less in gross receipts, Thoroughbred breeders find themselves facing tough times as the calendar flips to 2009. Though many stud fees for the coming year have been lowered, breeders who sold yearlings in 2008 did so based on high 2006 stud fees, seasons paid for in 2007.

The trend, by the way, was not seen just in North America, but around the globe. While the Central Kentucky auction house Keeneland, since it offers more horses than anyone else, felt the biggest hit, English-based auction company Tattersalls saw its gross decline from 244,835,900 guineas to 167,555,450 guineas, a 32% drop.

As we appoach the new year, pinhookers prepping 2-year-olds for sale have to be worried, considering when they purchased yearlings in July, August, and September the Thoroughbred market was still fairly healthy. Now, the same cannot be said as they prepare to send those horses through auction rings next February, March, and April.

If pinhookers, who have become such an integral part of the auction market, realize few gains in the spring, they obviously will have less to pay for yearlings next summer and fall.

By nature, Thoroughbred breeders have two important things in common—a love of the horse and an optimistic nature. Those qualities become even more important in such challenging times.